Fight­ing fit

Finweek English Edition - - INVESTMENT - SIMON BROWN

METRO­FILE was once on the verge of bank­ruptcy but the direc­tors slowly brought the com­pany back to life and it is now not only grow­ing rev­enue (+11.5%) and HEPS (+18.8%) in the six months to end-De­cem­ber, but also se­ri­ously strong cash gen­er­a­tion up 42.9%, which saw the div­i­dend in­crease 50%. The cash be­ing gen­er­ated is also be­ing used to pay down the debt and the debt/eq­uity ra­tio now stands at 33.1% vs 55.1% a year ago and it was well over 100% a short while back.

The com­pany’s busi­ness model is sim­ple enough: build a large ware­house and store doc­u­ments for busi­nesses that are re­quired by law to keep a large num­ber of doc­u­ments for pre­scribed pe­ri­ods. Aside from an ini­tial up­front cost of a new ware­house, the run­ning ex­penses are fairly mod­est and in­come is pretty much pro­tected. Sure, a busi­ness can move to an­other doc­u­ment stor­age com­pany, but trust and re­li­a­bil­ity are crit­i­cal here and Metro­file is cross­selling other ser­vices to ex­ist­ing clients.

The Nige­rian ex­pan­sion was ter­mi­nated but the com­pany still has a pres­ence in six other African coun­tries, and man­age­ment re­mains cau­tious about ex­pan­sion (the near bank­ruptcy makes it ex­tra cau­tious – a good thing).

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